A LEVELS U-TURN:
GOOD OR BAD NEWS FOR PBSA?
In Higher Education, the nature of the Covid-19 pandemic has resulted in news, guidelines and often, law changing so rapidly that even the eagle eyed amongst us have difficulty in keeping up. In the world of PBSA we have been pulled in several directions. On a micro level, operators have been spread thinly as they work to keep students and staff safe, resolve rental fee grievances, reassure university partners, implement a plethora of safety measures and forecast as best they can, potential voids for 20/21. On a macro level, the running rhetoric is that PBSA continues to be a solid investment with additional growth predicted over the coming years. However this can be difficult to comprehend when many are not reaching occupancy level targets and are still concerned over whether their international bookings will physically turn up. Amongst investors and advisers, Covid-19 may be viewed as a short-term blip, but what impact will this “blip” have over the next few years, how long will it last and when will “normal” return?
By way of a recap, the Government’s U-turn on A-level and Highers results and, subsequent abolishment of student number caps and course caps ensured that many universities previously worried about the impact of Covid-19 were set to have a record number of students commencing courses. However, it wasn’t all positive news as some lower tariff universities were set to miss out, placing them in significant financial difficulty as they failed to secure adequate student numbers.
After a week of turmoil for the A-level students who received unexpected grades, (as a reminder, 40% were downgraded because of Ofqual’s algorithm), the Government’s decision to eventually U-turn A level results decisions was welcomed. The U-turn decision, one which universities were not consulted on resulted in an increase in the number of students equipped with the grades to match the offer of their first-choice university. However, many of these students were rejected from their first choice and their places offered to other students.
Additionally, students who selected a university place via their insurance offer or clearing run the risk of leaving those universities in financial jeopardy as students seek to take places at preferential universities. As a result, we witnessed some universities accept all students who received the necessary grades while others guaranteed them a place in 2021 instead. This of course will have a knock effect on opportunities for the A level class of 2021.
Alistair Jarvis, chief executive of Universities UK and Dr Tim Bradshaw, chief executive of the Russell Group both conveyed how this U-turn significantly challenged Universities in terms of capacity, staffing, placements, and facilities – stretching resources to the point that it undermines the student experience. Additionally, in light of the Covid-19 pandemic, when the onus is on universities to keep students and staff safe and implement social distancing measures, Dr Tim Bradshaw argued there are limits to what the University sector can do, with The Independent reporting that some universities have lecture rooms with 20% capacity only as a result of required Covid-19 social distancing measures.
Increasing Capacity, is it that simple?
The Government’s expectation for universities to increase capacity as much as possible to accommodate affected students was met with a high degree of frustration by many universities who were capped by course, facility, and staff restrictions. UCAS reported 69% of students were offered their first-choice institution, a higher proportion compared to the same period last year. The government’s decision to lift the cap on student numbers to allow universities to accept as many students as they like sounded like a good idea, however, this was limited by physical restrictions.
To assist universities, the Government increased funding for certain restricted courses, including medicine and dentistry, but it still did not address concerns about staying Covid-19 compliant, with many Universities restricted on the number of places due to the requirement to provide one way systems and social distancing in teaching rooms, libraries and, catering outlets.
Expect to see more of an impact on ‘lower tier’ universities?
Recent data from UCAS indicated positively that acceptances from UK students rose by 2.6% compared to 2019. Placed students from outside the EU grew by 3.3% including an increase of 15.6% from the Chinese student community. However, acceptances from EU students declined by 8.5%.
Concerningly although unsurprisingly, StuRent reports that student growth remains uneven across universities. The most prestigious institutions have reported year-on-year growth and an acceptance increase of 6.3%, compared to a fall of 0.2% for those deemed as lower tariff. Isolating non-EU students, higher tariff providers have reported an increase of 9.7% in 2020, whilst medium and lower tariff providers have reported declines of 9.3% and 6.0% respectively. Overall, this increase in higher tariff acceptances resulted in almost a third of students (34%) choosing to study at higher tariff universities, continuing the trend of “seeking out quality” as witnessed in recent years
The Government announcement to allow UK students who have accepted offers based on their downgraded results, to release themselves if another offer is reinstated based on their updated grades, presented a further challenge to less prestigious universities who were already suffering from a decline in international numbers. Mary Curnock Cook, former head of UCAS, predicted that up to 55,000 students could try and switch to their first-choice and during the U-turn period we witnessed the chaos caused for university admission teams as they grappled with ensuring each student had the correct offer.
This, coupled with an unlimited cap on student numbers, resulted in lower tier universities facing significant financial pressures and as we are aware, impacts to student numbers and finances this year will be felt over the next 3-4 years. As a result, many UK universities and supporting bodies are continuing to demand government support and funds to support institutions facing crippling shortfalls
Bad News for Student Accommodation providers?
One of the biggest concerns since Covid-19 brought the world to a halt, closing universities and sending students home, is whether domestic and especially international students would return to campus for the new term. Uncertainty on whether campuses would fully re-open, concerns over hybrid teaching and restrictions on overseas travel meant many unknows still existed for both operators and universities. As we have witnessed and despite concerns from many critics, universities opened social safe campuses, operators welcomed back students, however despite best efforts, we are in the midst of mandatory isolation instructions in MMU, local lockdowns in Newcastle, Leeds and Glasgow and just recently the University of Manchester, MMU and University of Sheffield have announced they are moving teaching online for minimum periods of 3 weeks.
Despite, overall international student numbers being down by approximately 5%, student accommodation providers concerned about occupancy levels because of Covid-19 were initially encouraged by the requirement to increase university capacity where possible.
As many universities guarantee accommodation for first year students, an increase in student numbers is positive and this increase no doubt resulted in some universities having an undersupply of accommodation. They looked to third party providers to assist in accommodating the surplus and although the demand for PBSA accommodation will vary region to region, operators where possible should look to optimise this opportunity in order maximise their occupancy levels and seek to provide flexible contract lengths for students who may have deferred entry until January 2021.
PBSA operators are not out of the woods yet as there is still a risk that international students will fail to show at the start of term. On the ground, student facing staff are aware that international students arrive in dribs and drabs over an extended period. Confirmation and data of whether they will arrive is likely not to be available until the end of October.